Nikki Foley: Most people know they should save money. Fewer people know how they should invest it. And even fewer understand how today’s investment decisions eventually impact tomorrow’s retirement income.

That’s why we’re kicking off a four-part series on investment and withdrawal strategies.

In this first episode, we’re laying the foundation for how goals, cash flow, net worth, risk, taxes, and investment strategies all work together to help build long-term wealth. Because before you can create a retirement paycheck, you first have to build the assets that will support it.

So, welcome to Paladin Financial Talk. I’m your host, Nikki Foley, and I’m joined by featured adviser Jeff Foley. Welcome, Jeff.

Jeff Foley: Thank you for having me.

Nikki Foley: All right, Jeff. So here we go. First of all, we have to talk a little bit about you to get us started.

We started this almost 10 years ago. I can’t believe, as we look at the calendar, look at the clock, however you want to say it, we’re almost 10 years into this.

We can read about your background on our website and talk about you, but some of the things that I want to talk about today, as we get started and as we talk a little bit about what we’re doing right now, is that you’ve done more recent media appearances. You’ve been featured on KARE 11 several times on their Minnesota & Company segment. You’ve been doing a lot more on social media. You’ve been providing short nuggets for people along the way. We also had a feature in Fortune magazine.

We’ve changed our podcast so that it is having more guests or doing more interviews with our advisers.

Why is this important, and what do you hope we accomplish with this?

Jeff Foley: Yeah, it’s all about outreach. The more ways that we can get in front of people to educate them, there’s always something new, something to learn, and people consume things differently.

For years, we’ve done a lot of seminars and workshop events, and some people just aren’t going to go to those types of things. It’s not their jam. So having video and social media and the podcast, things like that, have been helpful to get our name out there and help people in a different way who weren’t going to be tuning in to others.

Nikki Foley: Yeah, absolutely. I feel like education is a key piece of who you are and something that you have made a hallmark of our organization as a whole, making sure people have the information in front of them to continue their financial journey.

Jeff Foley: We want people to be nerdy like us.

Nikki Foley: You keep the nerd on your side there. So, let’s talk. This is the first show in a four-part series, like I mentioned in the intro, and the series is going to give us a foundation of everything about how you build wealth.

Building wealth and creating retirement income are not the same thing, but they require a strategy. I think strategy is a key word that we’re going to use throughout this series. The adviser team at Paladin Financial is going to provide key concepts over the next four weeks that guide investment and retirement planning.

Things like the word accumulation, that might not be a household name, but it’s everything you’re doing from the first time you open a 401(k) at your first job, all the way leading up until it’s time to start taking income from that bucket of assets. What are the strategies that go behind that? Then, when you have to start taking money out, you’re doing that in a strategic way.

So, we’re talking about retirement withdrawals. We use something called the bucket approach, and we’re going to spend a few episodes on what that is and why we’re doing that.

Whether you’re building wealth or preparing to live off it, the series provides a practical framework for how all of this works and how making financial decisions hopefully can be done with greater confidence once we get done with it. That would be a good thing.

Jeff Foley: All right.

Nikki Foley: As a beginning part, I’ll have to tell a story here. This last weekend, I did the MS150. That is a 150-mile bike ride to support MS. I was not prepared, but I did it. We had some serious winds and some serious hills. But the story I want to tell is not about the bike race. It’s about a conversation I had on the bus on our second day. I was sitting with a gentleman I go to the gym with, and he works for a major company here in town.

Something that came out of his mouth is something you hear quite often: “I am working right now. I’m putting money in my 401(k). It just doesn’t seem that complicated. I feel like once I get to retirement, I might need to have some additional perspective, but right now, while I’m just growing my assets, it’s not that hard.”

Do we hear that quite often?

Jeff Foley: Yeah. A very common thing that we hear is, “I put 15% or 20% of my income away, call it a day, and move on. I’m raising kids and doing other things.” But there are a lot of moving parts, even in that accumulation phase. There’s a lot more depth that you can add to things.

When you transition closer to retirement, it gets a lot more complicated. Taxes become a much bigger consideration. There is a lot of depth with that. If you think about our industry, there is no shortage of designations that financial people can get to further their knowledge.

A couple common examples: the CFA, chartered financial analyst, is someone who specializes in investment management. So, not withdrawals and taxes. It’s all about investment allocation and making that thing grow appropriately and beating benchmarks over time.

That CFA is really difficult to get. It’s at least as hard as the CPA exam to pass. So, if you think about just managing assets, there are a number of designations and specialties where you can focus on that.

Nikki, you’re working on, kind of halfway through, the RICP designation, which is focused on retirement income. There are tax designations, etc. There are definitely a lot of moving parts. It’s like anything. You can keep it simple, but there’s a lot more depth you can add to it.

Nikki Foley: Yeah. So what I heard you say there is specialization exists for a reason. We’ll get into that today, and we’re going to dive into some of the things we might find as roadblocks or areas where having a strategy could be important.

With that, one of the perspectives as we go through this is that some pieces are very common sense, and then some get technical. Starting out, there is the concept of SMART goals. That is a term people sometimes have found in corporate life, and SMART stands for specific, measurable, aligned, realistic, and having a timeline.

Whether you get into SMART goals as it relates to the financial side or not, starting with a goal and knowing where you want to go is a key piece of wealth planning in general.

The reason I bring up SMART goals is, as I was going through some continuing education, this concept of

SMART came up, and I thought about applying that back to how my brain never stops and I’m thinking about all the things I want to do.

One of the things that has been on my dream list forever is owning a doughnut shop. My grandpa owned a doughnut shop. He owned a grocery store. One of the things he told us is, “Never get into owning a doughnut shop,” because of the early mornings and some of the crazy that went along with it.

But when you get into a level of being that specific, measurable, realistic, and having a timeline, would that goal still stay on your list if you actually got into that level of thought and planning?

When Jeff and I were thinking about starting this business, we also went and interviewed a couple of business owners who own doughnut shops. When we got to the end of that process, I don’t know if you remember this, but I think you said it to me: “I’m sorry, Nikki. When did you think all of this was going to fit into our life?”

Because we had two kids, and it would not fit into our world right now to have a doughnut shop where we had to be there at 3:00 a.m., we were finishing up at 2:00, and we had to get in bed by 8:00 at night so we could be up by 3:00.

When you start to examine something at that level, maybe it belongs or maybe it doesn’t belong on your list of goals. From a financial perspective, it’s quick and easy to say, “Oh, these are my two or three or five things that are on my list,” but are they really on your list if you were required to put more specifics in there?

I feel like Jeff is just waiting to throw a zinger in here at me.

Jeff Foley: Your solution is to sample as many doughnut shops in the Twin Cities area as possible.

Nikki Foley: And whenever we go on vacation, a doughnut shop is always on our stop.

Jeff Foley: Compromise.

Nikki Foley: Exactly. So what I want to put out there, as you think about starting this wealth planning journey wherever you might be in it, is that knowing what you’re aiming for and having a goal is a really key piece.

I would challenge you to get more specific and use this terminology of SMART goals: specific, measurable, aligned, realistic, and having a timeline. Does it really belong in that top three or top five list?

Once you get past that, I think it’s important to have two additional concepts that keep things really basic.

Finances can get so complicated. You turn on the TV and listen to some of the lingo and jargon that goes along with this industry, and it can be overwhelming. You might want to turn it off.

So these next two, I want to keep simple.

It’s important to understand the concept of cash flow, and that is really simple: what’s coming in and what’s going out. At the end of the day, is there anything left over? Usually that involves a checking account or savings account. That’s where the movement is happening most of the time.

If cash flow has some extra left over, then there’s an opportunity to do something with it and maybe get a little more complicated into the investment strategy we’re going to talk about today.

The other piece is net worth. Net worth is assets and liabilities. How much do I have in my bucket? How much do I still owe on things like cars, homes, other debt, credit cards, education loans, things of that nature?

Again, three very basic concepts that I think are important to this whole conversation before we get a little more complicated. The reason I’m talking right now is I’m keeping it very basic. We’re going to let Jeff go through all the complicated stuff.

So, have a goal. Know what cash flow looks like and whether there is any excess. Then zoom out and ask, big picture, how much do we have in our bucket? If we compare that against liabilities, is it a positive or negative number?

At a period in your life, it might be upside down. You’ve bought a house. You’re starting out. Negative doesn’t necessarily mean wrong, but it’s a number we should pay attention to along the way.

As people start accumulating money into their retirement accounts and when they decide to buy a house, typically those two are going to be the largest assets they have along the way. All of these things combined are about keeping it simple, not making it overly complicated. However, there is a place for specialization along the way, and we’re going to talk about where that comes in today.

Jeff Foley: Yeah. Another way to add on to that is your cash flow feeds your net worth, positively or negatively. If you have positive cash flow and you have that excess money and you invest it, that can help build your net worth positively.

If you’re spending everything that comes in and you’re racking up debt in addition to that, your net worth is going to go down. They definitely speak to each other.

Nikki Foley: Yeah, absolutely. If you take anything away, you could take something away in this first 10 minutes here: those are three concepts to pay attention to along the way.

But let’s get into this, Jeff, and get into more of the bigger picture here. I like to look at common ways to approach this as being time-related and intentional. So, common things that we run into that might be keeping us from accumulating or having a positive perspective on these things. First, time-related, then being intentional.

Jeff, let’s get into this, and I’ll let you take it into some of the things we might see.

Jeff Foley: The first one that comes to mind is not defining your lifestyle goals. What do you want life to look like? You have to think about your big picture, which ties into the SMART goals that we talked about.

If you don’t set personal expectations for that, you can easily experience lifestyle creep. Your income increases each year, and your expenses increase equivalently to maintain a higher level of lifestyle as your pay increases. So, being mindful of that.

Second is not performing regular financial check-ins. Like anything, if you inspect it, you’re going to do better with it. Whether it’s wanting to lose weight, if you monitor your weight, you’re more likely to actually lose weight than if you’re not paying attention to it.

So whether that’s once a week, once a month, once a quarter, some type of regular financial check-in is important. Every other year is not regular. If you’re working with a financial adviser, that’s helpful. That’s a forced date on the calendar to make sure you’re looking at it.

Number three would be failing to invest early and regularly. Starting off, you graduate college, and if you did graduate college, maybe you have student loans, and you’re paying those over the next 10 years. It’s very difficult in those early years in particular to put money away. But even if it’s a little bit, it builds that habit. The time value of money, as we’ve talked about numerous times on the podcast, is immeasurable.

Even a little bit, increasing that over time, is going to be significant.

Fourth is failing to insure for the unexpected and not taking advantage of employer benefits. Most people don’t think bad things are going to happen to them. Disability insurance is the first one that comes to mind.

People think, “I’m healthy. I’m young. I don’t need disability insurance.” That’s the whole point of it. Things do happen.

We’ve all known one person or multiple people in our lives who have had something bad happen. They’re disabled, they can’t do what they were doing before, their income goes down, and typically their expenses go up.

So thinking about what those bad things are, that’s a great place for insurance. Everyone drives around with auto insurance, and most people aren’t going to think of not insuring their home because of the significant risk there. So think about disability insurance, life insurance, things like that, and taking advantage of your employer benefits.

I think you’re going to talk about this here in a little bit, but spending time to evaluate what you can get through your employer, what add-on benefits are available, what those are going to cost you, and the risks those are helping to cover can be significant.

Nikki Foley: I do want to add on to this. This is one that I’ve used in other episodes. Before I do that, Jeff, you’re going through the things that can get in the way of building your net worth or building your bucket of money along the way. The first part of this comes back to being intentional and making time for something.

Before we go into the next portion, I do want to touch on a statistic that I’ve used several times. I didn’t know exactly what it was, so I finally took time to look it up. It was somewhere between 13 and 17 minutes as the approximate amount of time that an employee spends on renewing their benefits annually.

Your HR team puts together this fall event where you can redo your health benefits and introduce anything new. I had the statistic in my head that it was 13 to 17 minutes, so I actually looked it up.

The Society for Human Resource Management, also known as SHRM, states that about 42% of employees spend 20 minutes or less reviewing their options for benefits annually. Another statistic said 67% to 69% of people spend less than 30 minutes overall researching, making a decision, and going through the whole process.

Big picture, those are pretty powerful statistics because benefits are often the second-largest component of compensation after salary. So, a big piece, yet employees typically spend very little time evaluating it, probably less than they spend planning a vacation.

Jeff Foley: I was just going to say vacation planning is typically a lot higher.

Nikki Foley: Yeah, absolutely. Okay, so making time and being intentional were your first ones. Where else does this fall apart?

Jeff Foley: The next three, you might need a professional to help you out with, depending on your level of nerdiness and how much you want to spend on this.

I’d put seeking opportunities to get financial advice, whether that’s from a tax person, a financial adviser, etc., into another category by itself.

But not understanding taxes and using tax laws to your advantage shows up both in the accumulation years as you’re saving for retirement and, as we talked about earlier, as you get close to retirement and navigate into retirement, it becomes even more important for a variety of reasons.

Taxes are one of your biggest expenses. If you look at a pie chart of where you’re going to spend money over your lifetime, that tax piece is pretty darn big. It’s a Thanksgiving-sized piece of the pie.

Another is not allocating assets properly or adjusting when needed. One of the things that happens there, if you look at the stock market over the last 10 years, is it has done extremely well. If you’re heavy in equities, those equities become even heavier, and you have less money in safer things, bonds and cash for example.

You have to be mindful of pulling some winnings off the table, maybe reallocating and adjusting. That goes back to having a plan. When are you going to use this money, and based on that, how should it be allocated? We’ll talk more about that here in a little bit.

Third is not preparing and choosing the best way to take money out. When you switch into that income phase, where do you take that money from? Do you pull it from your Roth first, your IRAs, your pre-tax money, your brokerage accounts? Should you spend your cash down first? What about Social Security and pensions?

All of these things have to be mixed together in the best way possible, and you really need to start that before retirement. No matter what age you are now, you need to start looking ahead for that. If you’re 30 years old and saving money for retirement, the manner in which you’re saving, pre-tax or Roth, is going to have an impact on what your options are and the cards you have to play as you navigate into retirement.

Nikki Foley: Up until this point, I felt like we were keeping things within a fairly common sense approach.

SMART goals, things maybe you’ve heard before. But now I feel like we’re getting into the nitty-gritty.

What I heard you say right there, Jeff, is that one, you’ve made a decision that you are going to have some excess assets. You’ve begun accumulating those. Now, what do I do with them? Then, okay, I’m to a point where I need to start using that to live off of, or I just need to take it out for something in general, like replacing my roof or whatever it might be.

There’s some strategy behind that. Oh, by the way, don’t forget about taxes. Those all seem fairly complicated.

So, let’s get into this. This is really where I want to spend our time today, the things that are a little less common sense, where we might need a professional.

Here are some pre-investment considerations that I like to think through. Back to the vacation example for a second. Let me put this in a different light and see if it makes sense, and then you can turn it around and make it apply to the financial side.

If we’re going on vacation and I’m planning a trip, I have to have an objective. What am I doing? Am I going on a business trip? Am I going on a family trip? Is it going to be adults only? There are all these variables.

What am I setting out to do? What’s my objective?

My time horizon: how long am I going to be gone? What does this look like from that perspective?

Is there any risk I should be aware of? I’m going to Florida, maybe it’s the middle of hurricane season.

Maybe it’s not safe to travel abroad. Is there any risk I should be mindful of?

How much is this all going to cost me? Is there anything else I might want to consider, like whether I actually have the money saved for this or whether I have to use a credit card?

When you look at it from that perspective, you have to plan for everything in life. Everything that you do.

That’s planning for a vacation. These same general concepts apply to the financial side.

What are my objectives? What are my time horizons? What are the risks? What is it going to cost me?

So I want you to turn this around. Hopefully I didn’t throw you a curveball here, but I want to take this back to the investing side.

Jeff Foley: Yeah, that’s great. Having a goal and knowing what you’re setting out for is important. That objective. Is it growth? Is it income? Is it both?

Your time horizon, as you mentioned with the vacation, how long are we going to be gone? Is that 40 years down the road, 30 years down the road, 20 years, etc.? That time horizon needs to speak to how everything else plays out.

If you’re 20 years old and retirement isn’t for a very long period down the road, things are going to look different than someone stepping into retirement.

What are the risks that you should consider? For travel, for me, that would be having GPS to know which direction I’m going. As it relates to investing, the market is the biggest one that most people focus on.

What’s the stock market doing in a given period of time?

But interest rates are a big piece of that as well. If interest rates are higher and you are an investor lending money to someone else, you’re getting a higher rate of return. Vice versa, if you’re borrowing money and interest rates are high, that’s a bad thing. Interest rates can have a big impact on your life.

Inflation is another one. A little bit of inflation is okay, but we don’t want deflation where people might see a drop in their paycheck. That’s not a great thing.

Liquidity is another. Having enough access to liquid funds. A common one that comes up is people don’t plan on retiring for three years, and they’re very aggressive in their investments. Then six months later, we get a call: “Hey, I lost my job, and my three-year plan is now today, and the market’s down 15%.” That’s not a good situation. Having liquid access and some money you can tap into when the market’s down is important.

Another big risk is ourselves. If the market reacts and the stuff hits the fan, as we’ve all lived through a number of those experiences, don’t make a bad decision when that happens. That’s why it’s good to go back to your core and have a good game plan. We’ll talk more about that as well.

Then, what else do I need to consider? What do I have in place in my existing portfolio? What type of investments, my allocations, my tax situation? What kind of debt? If you’ve got a mortgage and you’re paying 2.5% interest on that versus 16% on a credit card, that’s a very different picture.

Also, look at what benchmarks you should compare yourself to in order to be successful. A common thing that happens is everyone wants to compare themselves or their investments to the S&P 500. If you look at the S&P 500 over a long period of time, I would expect the return on that is going to be in the 10% to 12% range, depending on what period of time you look at.

Don’t expect your investments to be doing 10% a year on average when you only have 60% of your assets in equities. Be mindful of that.

A good example here is, if you beat the S&P 500 every year between now and the day that you pass away and you still go broke, is that a good thing? Your investments might have great returns, but if you don’t pair that with a good withdrawal strategy and the right allocation, you could go broke with very high investment returns.

There are a lot of things that go into consideration there, similar to your vacation analogy.

Nikki Foley: Okay. At this point, you’ve given us a foundation of some of the questions we need to answer up front: what are we trying to achieve, what is my estimate of how long I need to make sure this all lasts, some of the risks that might concern me, and how working with a professional might give me another perspective.

Being too conservative as an example. How much is this all going to cost me? What are some of the other things I need to consider, like taxes? We didn’t talk a whole lot about that, but having correct expectations.

These are things we want to establish up front as a foundation. So, assuming I do all of that, then what happens?

Jeff Foley: The next step is having some broad strategies, and then we’ll get a little more granular from there. A couple of the big ones that stick out are diversification.

A simple example is stocks. If you want to have a certain amount of your assets in stocks, you could pick one stock. Let’s say it’s Apple, Nvidia, whatever it might be. You put all of your eggs in one basket. Over the last 10 years, Apple’s done really well. Nvidia has done really well over a short period of time this year, for example.

But you have all of your eggs in one basket. Diversification is saying, “I still want to be invested in stocks, but maybe I have 50, 60, or 100 different stocks that I’m invested in.” I might not perform as well as Apple in a given period of time, but I’ve reduced my risk by not tying everything to one investment. We’ll talk about an example of that locally here in a moment.

Dollar cost averaging is another big one that starts today if you’re still working. The idea is that you’re putting money in on a regular basis. Let’s say it’s $250 a month. You’ve got a fixed dollar amount on a regular schedule, and over time that might result in a lower average price per share versus buying the money periodically. Dollar cost averaging is about being consistent.

Asset allocation is different from diversification, but they’re kind of kissing cousins. It’s a form of portfolio diversification where, at a high level, you have stocks, bonds, and cash. That’s a simple way of looking at it.

How much of your assets do you have in each of those three categories? The answer to that is going to depend on your risk tolerance and your time horizon, as we talked about earlier.

Another thing is bond ladders, where you stagger fixed income maturities. You do this with CDs as well.

Maybe you buy a two-year CD, a five-year CD, and a 10-year CD, and that helps reduce your interest rate risk because your money is coming due at different periods of time.

Those are some high-level ones.

Nikki Foley: I don’t think either of us said it at the beginning. These are investment strategies. What is my strategy? These are investment strategies. This is a way to go about accumulating your assets in a strategic way.

Jeff Foley: Yeah. Where is my money? What am I doing with my money? Going back to that net worth we talked about earlier.

Some other common ones that come up: barbell strategy, where you think of a barbell with a lot on two different ends. Maybe you have a lot in cash or safer things, and on the other end of the spectrum is equities, very risky. You’re pulling from those in retirement depending on whether the market is up or down.

An approach that we use a lot is the bucket strategy. We mentioned that earlier. To keep it simple, you have a short-term, medium-term, and long-term bucket. That gives you the ability to fluctuate and pivot where you’re pulling income from in up and down markets.

We also layer into that bucket strategy how the money is taxed. You have taxable, tax-deferred, and tax-free money. Picture a grid with nine boxes: short, medium, and long; taxable, tax-deferred, and tax-free. You can get to a pretty good approach to how your money is allocated and where you pull that income from.

But you want to have some depth to your approach. It’s not just picking a handful of ETFs and letting that ride over time. You want to have some vision and have something you can center back to when the market does really good things and it’s easy to want to throw more money into that, or when the market does really bad things and our tendency is to hit the panic button, sell everything, and move to cash.

Those are some big-picture things to consider.

Beyond that, you can get a lot more granular. Am I a buy-and-hold investor, where I pick things and hold on

to them over a long period of time? Maybe it’s value investing. If you’ve heard of Berkshire Hathaway, that’s a value investing company where you’re purchasing things that you feel are undervalued, the market doesn’t get it, and it’s going to catch up over time.

There could be growth investing, like Apple and Nvidia, companies that are high growth, at least in a given period of time. Dividend investing, looking at companies like Home Depot that pay good dividends. If you look at a chart of their dividends over time, they consistently increase. That’s an approach.

We could go on and on. There’s a list of about 10 I’m looking at that we’re not going to go through, but there’s a lot of granularity you can get into with this.

Nikki Foley: To pull that back out and repeat what I heard you say, it starts with some basic concepts of diversification, dollar cost averaging, asset allocation, and then from there you apply a more granular level of strategy beyond that. Correct?

Jeff Foley: Correct.

Nikki Foley: Would that be fair?

I’ll say back to this MS150 that I rode in. I was riding next to a couple people on Saturday and heard them talking about Warren Buffett, Berkshire Hathaway, and his approach to investing. I was like, “Oh, it can show up anywhere.”

Then they were talking about how to use your HSA and keep those receipts, but if you have the cash in your account, don’t use your HSA account. Let that ride so you can have it invested and use it maybe at a later point. I was like, “Oh, I’ll stay with you guys for a while. I want to hear what you have to say.”

Okay, Jeff, choosing a strategy really allows you to come back to something. As the world goes on around us, and we have to withdraw big amounts, or there’s a war, or there could be a variety of things happening to you, knowing what you stand for and what your strategy is allows you to come back to that and get in a balanced state as things happen around us. Is that fair?

Jeff Foley: Yeah, spot on. We were talking about this before recording, that it applies to your life as well.

Everyone has their beliefs, whether it’s spiritual or their ethics. When something big happens in your life, whether it’s good or bad, people, whether they realize it or not, come back to, “What am I about?” That helps inform what decisions to make.

You can apply that to your investing philosophy as well.

Nikki Foley: This is what I love about life. Whether I use the example of going on vacation, the things that go into creating a vacation are the same general concept that goes into creating a financial plan.

Your emotions are your emotions. They’re going to go with you wherever you go. They go with you with your finances. They go with you when something big happens and how you feel about something. It really is fascinating when you bring it back to the basics of everything.

It can apply to finances, and you can keep it simple stupid, the concept. If you can understand the basics of things.

So, what about mistakes investors are making?

Jeff Foley: There are a lot of common ones. The first one that comes to mind is procrastination, where people put off things they know they should do. We all do it. We’ve talked about this before, but the best time to plant a tree was 30 years ago. The second best time is today.

Stop procrastinating. Take a little bit of action. Once you do that, one foot is going to follow the next.

Analysis paralysis is another. You’re thinking, “I could do this. I could do that. Let me research this. This

website says I should buy this, and this one says I should sell it. I should take this approach. I should take that approach.” You have to pick a path at some point. If not, you’re not going to do anything, and that’s an answer too.

That’s where having a good financial professional in your corner to help you think through those things is very helpful.

Failure to pay yourself first is another. We talked about lifestyle creep earlier. Set aside even a little bit of money that you’re saving for your retirement or any goals that you have.

Picking investments first and strategy second. SpaceX recent IPO, everybody’s very excited about it. That may or may not fit into someone’s game plan. Investing some of that might be okay, but not being too heavy in any one thing rolls into the next one, which is failure to diversify.

It’s very easy to get to a place where you have too much invested in one holding, and then something bad happens to that and you’re turned upside down.

Another is not aligning investment goals with personal goals. Remember, your end goal with your money is to support your life. It’s not to get a particular rate of return or whatever you want to look at. It’s supporting your life and what you want that to look like.

No clear time horizon. We talked about earlier in our example of knowing how many years it’s going to be until I might need this money. That’s why we use the bucket approach, because most people have short, medium, and long-term goals that come up. Sometimes those are not planned. They’re surprises that happen along the way.

Some people are either excessively risk-averse or they’re too risky. Both of those can be not great.

Not having enough or having too much cash in a portfolio. That happens when you sold something and never got around to reinvesting it, or you made some money or got an inheritance, and life is busy, and you haven’t gotten around to investing that.

There are a number of different mistakes that happen, but I would say those are in the top 10 for most people and how they can derail retirement.

Nikki Foley: As you were going through those, Jeff, and I know you didn’t even get through all the ones we had talked about ahead of time, a strategy…

Jeff Foley: I ran out of breath.

Nikki Foley: A strategy is almost like a template. A template is a beautiful thing in so many aspects of life.

Whether you need a template for packing your bags to go on vacation or a template for anything, that’s your strategy.

As you rattled off all these mistakes that might come about, if you bring it back to that center point and that template, that should be a helpful thing. Sometimes it takes an outside person to help you do that.

Jeff Foley: I’m smirking because I need a template for what clothes to wear when you’re out of town.

Nikki Foley: All right, Jeff, do you have a real story?

Jeff Foley: A big one that comes to mind here that is relevant locally is, if you work for an employer and they’re a publicly traded company, you might have an employee stock purchase plan. You get a 10% or 15% discount on purchasing that. You’ve been there 10, 15, 20 years, and the value of that asset continues to grow. You’re putting more and more money into it, and then it gets out of hand.

I look at Boston Scientific locally. Over the past year, it’s down more than 50%. I can’t tell you how many people I’ve met with over the years who had a significant amount of their assets in Boston Scientific because they had been there for a number of years.

My recommendation was, “Let’s de-risk that a little bit.” The response is, “Why would I do that? Look at the rate of return this thing has provided, and I get this discount.” Now the asset is down by 50%. A lot of those people are now in retirement. That’s not so good.

It’s not that it is a good or bad investment. It’s not putting too many of your eggs in one basket.

Nikki Foley: All right. We’ve spent quite a bit of time today, and I know we have covered a lot. Let me ask just one more question, because I feel like what happens is people are chipping away each month at putting a little away, and it just kind of works with you.

But all of a sudden you get an inheritance, or all of a sudden you move companies and they offer bonuses.

It’s the first time you might have a chunk of money coming toward you. Then what do you do?

If you’re not somebody who has a strategy, do you just throw it into something? Why does that investment strategy come back when you’re sitting on a new bucket of money?

Jeff Foley: Yeah, it’s going back to the beginning of having goals. If you don’t think through that, the immediate reaction might be, “Hey, I’ve got this money. I’m going to go buy a car, a boat, or whatever,” and then it’s gone. Whereas that could be an opportunity to change the direction of your life and your retirement.

The first place I would look is what kind of debt is in place. If we have a mortgage at 2.5%, I wouldn’t be too aggressive personally on getting rid of that with that windfall. But if you have debt that you’re paying 8%, 12%, 15% on, you might want to look at getting rid of that first.

The next spot is, do you have an emergency fund set aside? If you’re living paycheck to paycheck, particularly if you’re under age 59 and a half and you don’t want to access your retirement assets without paying a 10% penalty, make sure you have enough emergency funds set aside that you can tap into if you lose your job, your car breaks down, or whatever it might be.

That becomes a little bit different once you get to 59 and a half, where you can access those funds without that 10% penalty. You still have taxes that you want to consider.

But debt and emergency fund are the first places I would look. Beyond that, where are you putting your money currently? Are you maxing out your retirement plan at work? How does the long-term picture look?

You might be in a situation where that windfall is something that you really can spend and not have to look over your shoulder. Buy the boat or whatever it might be, and you’re going to be okay. But we want to look at the big picture and center back to your goals.

Nikki Foley: Okay, Jeff. It is time to wrap up today. I’m going to recap what I think I heard us say today. I’m not going to hit on everything, so if I miss something, certainly chime back in.

The concept of KISS, keep it simple, stupid. Some of this could be very common sense if people want to label it that way. You have to have goals. It comes back to knowing how much is coming in and out of your account on a regular basis. Is that participating in helping my net worth grow over time?

Then I have this bucket of money that’s growing, oftentimes found in a retirement account. A home is the other place, but as for today, a retirement account. Then you start getting outside of that and having other buckets of money.

Does that money have a strategy? Does it have a plan? If I have a strategy for it, then I keep coming back to that, whether I get an inheritance, whether we get off track, or whether the world goes crazy around us.

Am I aligning with what I believe that vision is, what that plan is, and what our goals are? Sometimes that takes a professional to go alongside us, because as you talked about some of those risks, those are everyday risks, and you don’t even realize you’re getting off track until you get off track.

Making sure you set aside time to revisit your financial world matters. For some people, that is monthly.

Sometimes it’s annually with a professional. All in all, there’s a lot that goes into this. We didn’t even spend much time on taxes, and that’s a whole other piece of this.

At a very basic level, start with the ones that make sense and come easy to you. As you get into the more complicated pieces, if that is not your skill set, consider bringing in a professional to go alongside you.

Did I miss anything on that?

Jeff Foley: No, I think that’s good. This starts with, as we often say, having a plan, beginning with the end in mind, and thinking through what you want your life to look like and working back from there.

Nikki Foley: If we clearly want everybody to follow along with what we’re talking about, there are lots of other resources out there. You are an avid podcast listener. You listen to all sorts of podcasts. Do you have anything that’s a favorite that you think would help our listeners today and something you’d like to recommend?

Jeff Foley: I think a lot of the podcasts that I listen to are more geared for financial advisers. So, one, selfishly, our podcast. Hit subscribe and follow us. Check that out. Check us out on YouTube as well.

Dave Ramsey has helped millions of people across the country in setting themselves up for a good financial

life and navigating retirement. That is a good resource. It kind of depends on what direction you want to go.

Animal Spirits is more of an investment-focused podcast if you want to get nerdy into that. I’m scrolling through my podcast list as we speak here, but I think a lot of the ones I follow are more financial adviser- focused. Those are a couple ideas there.

Nikki Foley: All right, fantastic. Anything else you want to add to the show or think might be valuable for our listeners today?

Jeff Foley: Yeah. I think, again, start with a plan. Write out what you believe in, what your investment philosophy is, and have an investment statement of, “Here’s what I’m about. Here’s my approach.”

Whether things are really good and we’re in a bull market, or things turn the other way, you can come back to that and say, “Here’s what I’m about. Here’s my approach. Here’s my time horizon.” The vacation example that we walked through is applicable there. What’s your strategy?

That helps put some thought into it, and you start to think, “I never considered this before.” But pick your path and stick with that.

Nikki Foley: Well, if you’re sitting here thinking, “This sounds like me,” or “I need a second opinion,” this is something that we’d love to offer you. We offer a 15-minute, no-obligation conversation with Jeff, myself, or any one of our advisers to help you gain some clarity on the conversation that we had today.

Again, you can access all of us at paladinfinancial.com, but our show page is paladinfinancialtalk.com, and you can get to the booking side of things on either one of those.

So, paladinfinancial.com or paladinfinancialtalk.com. You can always call us at 651-842-8406.

Follow along on social media. You can find those links on both of those websites. We’re on YouTube, Facebook, Instagram, and LinkedIn.

We also offer a download that goes along with every show we have. We have several good ones located out there right now. Go out to our website, Paladin Financial Talk, see what’s available, and gain access to some of the things we’re talking about in bite-sized pieces and widgets you can use along the way.

With that, Jeff, thanks for joining me today. I certainly appreciate it. Thanks for listening. We’ll see you on

the next episode.